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Queensland Economic Advocacy Solutions

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Why the State Government is ‘NUTS’ to offer Scottish beer giant BrewDog industry assistance

February 14, 2018

There are times to offer industry assistance and then there are times not to, such as the State Government’s announcement of ‘luring’ BrewDog to Brisbane.

There was much fanfare over the announcement BrewDog will open a $30 million brewery in Brisbane including a 50 hectolitre brewhouse, canning facility, tap room and restaurant on an 11,000-square-metre greenfield site in Murrarie. 

BrewDog is expected to employ more than 150 people in the next five years and 235 jobs created over the next 10 years which is great news for the Sunshine State. However, it also represents a very poor decision on the part of the State Government in offering a series of financial incentives through the $65 million Advance Queensland Industry Attraction Fund.

“The incentives our government is providing through our industry attraction fund were instrumental in BrewDog choosing to base its Australian operations here in South-East Queensland, providing another feather in the cap of our state’s growing manufacturing industry.  Minister for State Development, Manufacturing, Infrastructure and Planning, The Honourable Cameron Dick

I have been a long-term opponent to financial incentives and tax holidays targeted towards particular enterprises.  By definition it means that remaining taxpayers pay more than they need to (ie it is inequitable) and it distorts competition as well. The financial incentives offered to BrewDog will never be known as it is obfuscated under the mantra of ‘commercial in confidence’.

What I am interested to know though is ...... has anyone within Government bothered to ask how the 20 plus breweries already established in Brisbane and on the Gold Coast feel about a new competitor launching underpined by State Government funding?  Yes that’s right, taxpayer dollars are being used to set up an overseas company in Brisbane to compete against an already mature Queensland run and owned industry in SEQ. 

Gold Coast and Brisbane Breweries

  • Aardvark and Arrow, Varsity Lakes
  • Aether Brewing, Milton
  • All Inn Brewing Co, Banyo
  • Bacchus Brewing Co, Capalaba
  • Balter Brewing Company, Currumbin
  • Black Hops Brewery Burleigh Heads
  • Brews Brothers, Woolloongabba
  • Brisbane Brewing Co, West End
  • Burleigh Brewing CompanyBurleigh Heads
  • Catchment Brewing Co, West End
  • Fortitude Brewing Co. North Tamborine
  • Fortitude Brewing Company
  • Four Hearts Brewing, Ipswich
  • Gold Coast Brewery Nerang
  • Green Beacon Brewing, Newstead
  • James Squire, South Bank
  • Laughing Lizard Brewing Company, Arundel
  • Lost Palms Brewing Co, Miami
  • Morgan's Brewing Company, Yatala
  • Newstead Brewing Co, Newstead
  • Oxenford Brewing, Oxenford
  • Scenic Rim Brewery, Mount Alford
  • XXXX, Milton

Amongst over things BrewDog may have been offered a payroll tax holiday as many State Governments in Queensland and interstate have and do for certain companies but doing it for this company is plain wrong for a number of reasons.

The Queensland Competition Authority conducted a really good Inquiry into this subject and concluded the rationale to provide industry assistance is strongest only when there is a significant policy problem that should be corrected through government action. However in respect to the BrewDog example there is no policy problem to warrant intervention nor need to achieve a critical mass to spark an industry to take off. This industry has already launched and spectacularly so.

This decision has the initial short-term gloss of being an ‘announceable’ and creating jobs but in the medium to long term our economy will lose out. At the very least the costs and benefits of providing this assistance should be transparent and in the public domain. The amount of assistance, as well as the evidence base that underpins the government's decision to provide it, should also be publicly available.  

And if you don’t believe me then read what the Queensland Competition Authority has to say ……

“Government intervention to alter consumption or production (through industry assistance) will generally lead to a net loss for society.

The evidence that is available suggests that, although a number of industry assistance measures are beneficial, many others are ineffective and result in a range of costs, including resource allocation distortions, lower productivity, lower household incomes and harmful environmental impacts.

A significant portion of industry assistance in Queensland is directed towards supporting certain businesses or sectors over others, rather than towards correcting market failures. In a number of cases, the primary objective is to directly increase the profitability of private sector businesses. This assistance is unlikely to lead to a higher level of economic activity than would otherwise occur. Much is captured by private firms with limited or no positive effect on the welfare of Queenslanders as a whole.

The findings from this inquiry suggest that selective industry assistance is generally not a successful policy to generate economic growth — it is only suitable to address a specific set of policy problems and, as such, should be reserved for those circumstances. There is general agreement, even within assisted sectors of the economy, that businesses not government assistance, drive productivity and economic growth. “

So there you have it. I am not a fan of this decision and I suspect it may become the ‘holy grail’ of the wrong type of State Government industry assistance in Queensland.

Closing the Gap Report highlights employment challenge for Aboriginal and Torres Strait Islanders

February 13, 2018

Yesterday the Prime Minister released the Closing the Gap Report 2018 highlighting the significant challenge ahead in providing employment opportunities to Aboriginal and Torres Strait Islanders that in turn provides them with a livelihood and advancement in living standards.

In 2016, the unemployment rate for Indigenous people of working age was 18.4 per cent, 2.7 times the non-Indigenous unemployment rate (6.8 per cent). The unemployment rate is unfortunately an increase from 15.6 per cent in 2006 and 17.2 per cent in 2011.

In short the Report confirms that we are not on track in meeting the official Closing the Gap employment target of:

Halve the gap in employment outcomes between Indigenous and non-Indigenous Australians within a decade (by 2018)

Progress against this target is measured using data on the proportion of Aboriginal and Torres Strait Islanders of workforce age (15-64 years) who are employed (the employment-to-population ratio).

Disappointingly the Indigenous employment rate fell over the past decade, from 48.0 per cent in 2006 to 46.6 per cent in 2016. Over the same period, the non-Indigenous employment rate was broadly stable, around 72 per cent. As a result, the gap has actually widened by 1.5 percentage points to 25.2 percentage points over the past decade.

The employment target is complicated by the cessation of the Community Development Employment Projects (CDEP).   CDEP was a Commonwealth employment program in which participants were paid CDEP wages (derived from income support) to participate in activity or training. CDEP participants were previously classified as being employed, overstating employment outcomes.

The report states that by focusing on changes in the non-CDEP employment rate over time we can get a more accurate sense of labour market developments. If CDEP participants are excluded from those employed in 2006, the Indigenous employment rate falls by 5.6 percentage points to 42.4 per cent. Given that the 2016 employment rate was 46.6 per cent, this represents a 4.2 percentage point improvement over the past decade.

Regardless of methodology though the gap remains the size of the Simpson Desert for Aboriginal and Torres Strait Islanders which is truly sobering as they represent a fantastic and very capable workforce.

Benefits that the Australian Chamber of Commerce and Industry’s Employ Outside the Box Report lists are considerable and include:

  • Employing Aboriginal and Torres Strait Islander may open up a growing market for products and services.
  • Pre-employment training provided for Indigenous workers can be beneficial to non-Indigenous workers as well.

  • In regional areas, the connection with local communities can be strengthened and Indigenous Australians can be more committed to working locally.

  • Respond to the changing ethnic profile of your customers and the need to reflect this in the workforce.

  • Market your business as an employer of choice by promoting diversity in the workforce and enabling an inclusive and socially responsible work environment.

  • Demonstrating strong corporate citizenship may assist in gaining a market edge with key clients and enhance the public reputation of your organisations.

  • Organisations will gain new skills and knowledge from training and working with Indigenous employees.

  • Youthful workforce with the potential to be long term employees.

  • Build cultural diversity in your workforce.

  • Access to government funding and assistance with regards to training, recruiting and retaining Indigenous employees.

In summary, the Queensland economy is slowly transitioning from excess labour capacity to a period whereby skill and labour shortages will start to emerge again.  It would be great to see this transition smoothed by the uptake of employing Aboriginal and Torres Strait Islanders.  True Closing the Gap at its foundation has to rely on employment for Aboriginal and Torres Strait Islanders that provides them a livelihood and ability to bridge this divide.

The top ten largest increases in cost of living

February 7, 2018

This week has seen some much needed emphasis placed by media organisations on the financial difficulty being experienced by many Queensland households.  The Consumer Price Index (CPI) released last Thursday confirmed a 27% increase in the cost of living over the past decade for Brisbane households and compares to the national average of 25.8%. This overall increase however masks component increases that are greatly exacerbated for lower socio economic households.

The Consumer Price Index (CPI) measures quarterly changes in the price of a 'basket' of goods and services, which account for a high proportion of expenditure by Australian households.  For a more detailed definition of the CPI please refer below. In all there are 87 expenditure items in the CPI and QEAS has analysed the top 10 that have increased and decreased the most over the past ten years for Brisbane.

Unfortunately the ABS limits this collection to capital city households but many of the below outcomes will unquestionably be even more exacerbated for regional Queensland than for Brisbane. Expenditure areas that have increased the most in Brisbane in last 10 years are:

Aside from tobacco these 10 areas represent unavoidable cost of living expenses for most Queenslanders and it is pretty easy to see why some households are rapidly falling below the poverty line at present.  Electricity, water and sewerage, insurance, education, childcare and health services are all examples of necessitated expenditure.

At the same time some expenditure areas are actually decreasing in price however before we get too excited many of these would be defined as being in the area of discretionary expenditure.  Expenditure areas that have decreased the most in Brisbane in last 10 years are:

Perhaps the one expenditure class that made my blood boil the most was seeing the cost of milk decline by 16.2% over the past decade. This is disgracefully a reflection of the dominance of the major supermarkets and is really a reflection of the duopoly squeezing their supply chain. In this instance it is predominantly Queenslander dairy farmers who are being hammered so we can enjoy cheaper milk.

In closing something to bear in mind is that over this period of time Queensland’s average week earnings have risen by 35 per cent.   Overall, we should theoretically be better off as the CPI has risen by just 27%. However, the reality is for those Queenslanders whose essential cost of living expenses make up a larger portion of their household budget, they would in actuality, be quite worse off as 35 per cent is quite insignificant compared to some of the cost of living increases cited above.

The Consumer Price Index

The CPI is a social and economic indicator that is constructed to measure changes over time in the general level of prices of consumer goods and services that households acquire, use or pay for consumption. The index aims to measure the change in consumer prices over time. This may be done by measuring the cost of purchasing a fixed basket of consumer goods and services of constant quality and similar characteristics, with the products in the basket being selected to be representative of households’ expenditure during a year or other specified period.

This 'basket' covers a wide range of goods and services, arranged in eleven groups: 

  • Food and non-alcoholic beverages 
  • Alcohol and tobacco 
  • Clothing and footwear 
  • Housing 
  • Furnishings, household equipment and services 
  • Health 
  • Transport 
  • Communication 
  • Recreation and culture 
  • Education 
  • Insurance and financial services

Queensland Productivity on the rise: implications for the Sunshine State

January 30, 2018

The latest Australian Bureau of Statistics' measure of productivity growth reveals the sixth straight year in a row of productivity improvement in Australia (growing 0.6%) and the news is also good for Queensland.  Our State's productivity growth in the last two years has bounced back following a difficult period post GFC and it is now second only to NSW.

Productivity measures the efficiency with which combined labour and capital inputs are transformed into product or service outputs which is called ‘multifactor productivity’ (productivity).  Productivity as a concept has evolved from the simplistic GDP / total hours of work as non human inputs are also used to produce and provide output.

I really like to think of productivity as doing more with the same or the same with less. It is one of the most important indicators because from a society point of view productivity gains are the main source of real economic advancement and higher living standards.  Furthermore:

  • From a business point of view with rising input costs such as electricity productivity gains enable business to stay afloat and earn profits.
  • From an employee point of view productivity gains lead to greater likelihood of increased wages.
  • From an environmental point of view with a scarcity of resources productivity gains mean we are drawing less from the planet.

In dealing with the national data first, multifactor productivity grew 0.6% in 2016–17, marking six years of growth since 2011-12. This follows a period of productivity going backwards between 2004-05 to 2010-11.  Productivity growth in 2016-17 was a result of a 1.9% increase in output against a 1.3% increase in combined inputs. The input growth represents capital services growth of 1.9% and hours worked growth of 0.8%.

The 2016-17 result was however below the long term annual average of 0.9 per cent and included "significant variations across industry groups”. The largest productivity gains were experienced by Agriculture, forestry and fishing (+18.3%); Art and recreation services (+6.2%); and Wholesale trade (+4.0%). Tempering these gains were significant productivity declines in Construction (-7.3%); Manufacturing (-4.7%); and Other Services (-4.6%),.

An exceptionally good season for agricultural products in 2016-17 saw agriculture productivity rise 18.3 per cent, the fastest rate of growth since 2003-04. Growth in construction was weighed down by a contraction of heavy and civil engineering  due to reductions in new mining and heavy industrial projects. This is the fourth consecutive year that Construction saw a fall in MFP.

For the first time the ABS released experimental estimates of state and territory productivity, providing an indication over two decades of relative state productivity growth rates. Queensland productivity following the GFC had been in decline but very pleasingly in the past two years it has bounced back. Queensland productivity grew by 1.7% the second highest of all States and compares to the long term State average growth rate of 0.7%

This is fantastic news as it means our economy is transforming inputs into outputs more efficiently and is producing more goods and services from the same quantity of labour, capital, land, energy and other resources.  This improved production efficiency will inevitably generate higher real incomes and lead to long-term improvements in our economy’s living standards for all Queenslanders to hopefully benefit from. Finally it is almost guaranteed and perhaps understandable that we will see Unions use this data to push for higher wages in the months ahead.

 

Has Queensland dropped the ball on the Review of GST Distribution?

January 24, 2018

Many readers will no doubt be aware that the Productivity Commission is currently undertaking an inquiry into Australia's system of horizontal fiscal equalisation (HFE), which underpins the distribution of GST revenue, and an issue of hot contention among State and Territories for almost two decades.  The Inquiry is considering the influence the current system of HFE has on productivity, efficiency and economic growth and whether there may be preferable alternatives.

I have previously asked whether this Inquiry is a threat or an opportunity for Queensland given that in 2017-18 as a State we will receive close to $15 billion in GST or 24 per cent of all money available despite having only 20 per cent of Australia's population.  My view it is undoubtedly a threat. The proposal with the most profound implications for Queensland is HFE should no longer be to the highest state, but instead to the average or to the second highest State.  If actioned Queensland will continue to be a net beneficiary of GST distribution however the extent of our benefit will be reduced by $729 million each year if to the second highest state or by $1.6 billion if to the average.

My fear is that Queensland is being outgunned in the war among States in advancing their interests.  It appears we may be more reliant on political rhetoric to progress our case as opposed to the substance of good representation underpinned and advanced through evidence and statistical research. Don’t get me wrong there are some very good and well reasoned arguments advanced in the Queensland Government’s submission but I think we can do considerably better.  Our arguments are articulated in theory and words and lack research and statistics to underpin them, which is surprising given the high calibre of Queensland Treasury individuals.

Page count is crude metric by anyone’s measure, but a quick analysis of submissions to the process by each State Government reveals Queensland has the lowest page count among all the State submissions. Those States that are cross-subsidising the most (like Western Australia) spent the most amount of effort arguing for how the current system is eroding their capacity to deliver services.  Oppositely those States that receive the highest level of equalisation like Northern Territory and Tasmania also spent significant effort in putting their submissions together. 

In its follow-up 14 page submission to the inquiry Queensland has diligently highlighted the impact that changes would have on the capacity to provide services. At the same time Queensland highlighted that in its view the case for change due to erosion of national productivity and growth had not been made by the other States.  Queensland Treasury states:

“Queensland continues to remain unaware of any evidence that this is a factor for governments in the setting of expenditure and revenue policies.

Where potential HFE impacts are considered in the policy decision making process, they are at best fourth or fifth order considerations. This means that many of the incentives or disincentives that are identified in the literature, and mentioned above, exist in theory but not to any material degree in practice.

Additionally, as Queensland set out in its initial submission, the most immediate benefit brought about by the current system of HFE is arguably in the services it allows States to provide. Any change proposed to HFE on the grounds that it will reduce disincentives to pursue economic growth must be balanced against the social costs of any potential reduction in services in some parts of the country – and the important role those services play in the long-term health of the economy.”

This is unfortunately and literally the extent to which Queensland is trying to counter the call for change and it is not enough.  To be fair the post draft submission stage of the process was smack bang in the middle of our State Election with Queensland Treasury in caretaker mode. However, my point is this, if Queensland wants to maximise the likelihood that detrimental change does not occur then we need to better debunk the Commission’s proposals and highlight how they will affect our productivity and economic growth going forward.

Queensland will lose to the greater good of lifting national productivity and economic growth if we are not proactive in countering states like Western Australia when they cite they are deliberately baulking on key reforms that drive economic activity because they are penalised GST payments in doing so.  By not countering the draft proposals with evidence and by not highlighting examples on how the Inquiry’s proposals would impact on our productivity and threaten our economic growth we run the risk of losing.  Fortunately, it is not too late with a public hearing in Brisbane on the 5th of February.

The Victorian Government’s submission does an excellent job taking apart the Productivity Commission’s Report. A question they pose is should we radically change the system to benefit Western Australia, noting that if we do we're essentially forgiving them for poor budget management in the past and not saving for the future.  Queensland and Victoria could and should work together in countering the Commission’s proposals as our interests (ie lost revenue) are generally aligned.

Queensland can't rely solely on a passionate State Treasurer appearing before the media throwing barbs at a Coalition Government to advance our interests.  We need the evidence and argument to back up our opposition to change, direct to the process.  If we don’t represent our interests in this manner we really only have ourselves to blame. 

 

Queensland apprentice numbers yet to rebound

January 17, 2018

Latest statistics from the National Centre for Vocational Education Research (NCVER) reveal that Queensland’s recent labour market improvement is yet to translate into a lift in apprentice and trainee numbers.

The official data shows just 57,100 apprentices and trainees in training in 2017 a number so low that it is comparable to in-training numbers last century.  At the same time commencements (38,100) are less than half of those in 2012.  Both in-training and commencement numbers have been in free fall over the past five years.  Pleasingly commencements have shown signs of an improvement with a slight increase in 2017 but overall numbers are yet to demonstrate a concrete trend on a quarterly basis and in any case remain at alarming levels. 

Contributing reasons for the unprecedented decline in apprentice and trainee numbers include a cessation of Commonwealth employer incentive payments (for commencement and completion) and dramatic increases in first and second year apprentice rates set by the Fair Work Commission.  Paradoxically Unions are currently campaigning to increase apprentice wages under an incorrect assumption that  it is a supply side problem that underpins the decline in numbers (which it is not, it is a demand problem by employers).

Business capacity to invest in apprentices is particularly vulnerable to economic cycles and the past five years have proven difficult ones in the Sunshine State.  However given Queensland’s economy and number of persons employed has been on the rise across 2017 we would reasonably anticipate that the number of apprentices and trainees to also rise, yet they haven’t. This is of significant concern as Queensland’s apprenticeship and trainee numbers underpin future business and economic prosperity. 

Responsibility for the formation, and development of skills is one shared by both government and the private sector.  This requires Government and industry to work together to deliver a workforce that meets the needs of our economy. Queensland employers perform an important service by taking on an individual in a training capacity, and it is essential that they continue to do so – this on the job training is crucial to the future requirements of our economy. At the same time the Queensland Government must drive skills development and greater participation in education and training and there are range of policy levers available to reverse this trend if given the commitment.

There are some very good initiatives currently being delivered by the State Government to promote apprentice and trainee uptake that are no doubt accounting for the recent uptick in commencements.  These include:

  • Employers who hire apprentices and trainees receive a payroll tax rebate of 50 per cent on their wages in addition to their wages being exempt from payroll tax.
  • Employers are eligible for $20,000 Youth Boost for hiring a young jobseeker aged 15-24 years.
  • 15 per cent of labour hours on government projects must be performed by apprentices and trainees.

However if the State Government is truly serious about increasing commencements, lifting youth employment and creating more jobs for Queenslanders it should be doing everything it can to encourage employers to take on apprentices and train the workers of the future. To my mind there are several further initiatives that could be implemented in order to leave no stone unturned and these include:

  • The 50% payroll tax rebate is only until the 30 June 2018 and should be a permanent initiative.
  • An apprentice pledge should be introduced that provides dollar incentives to employers (between $5,000 and $10,000) to take on an apprentice and also discounts on Workcover Premiums.
  • Introducing adult apprentice wage subsidies.

Furthermore these initiatives should be extended to group training companies who are a major employer of apprentices and trainees.  The fact that they are ineligible is a curious aberration to good policy in this area.

The above measures would go part way de-risking employers to take the leap of faith of bringing into their business an inexperienced trainee or apprentice.  At the end of the day unless we fully 100% offset the cost of hiring an apprentice and trainee ultimately it comes down to ‘is there enough money coming into the business to pay for their employment'.  It is often under appreciated the opportunity cost of time spent training new and inexperienced employees.  However the above  initiatives would represent a sizeable offset to employers. that would surely lead to a boon in numbers.

Furthermore we need to have a conversation about restoring employer faith in the VET system in order for them to take on board an apprentice or trainee. Students need a qualification that is actually valued by and relevant to their prospective employer and this is not necessarily the case at present.  In addition Queensland needs to continually evolve its participant administration (red tape) in this area to make it technologically easier for small businesses in particular to hire and document training.

Finally employers should also be encouraged through a public campaign to take on an apprentice or trainee as it is essentially training the workers of the future, investing in their own business’s future and ensuring our economy in coming years has the skills necessary to grow without constraint.

The Bright Future of Queensland Manufacturing

January 3, 2018

Generally people have mixed views on the future of manufacturing in Australia as a source of jobs, exports, investment and growth.

The backdrop is Queensland manufacturing was once the largest and most important industry sector for the Sunshine State.  It has now slipped to fourth in respect to both contribution to gross state product and employment.  Manufacturing’s contribution to the Queensland economy between 1989-90 and 2016-17 has decreased from 11.4 per cent to just 6.3 per cent and as a percentage of total employment has reduced from 11.9 per cent to 7.2  per cent over the same period.

The issue relating to Queensland manufacturing is really one of competitiveness.  Manufacturing is increasingly at a competitive disadvantage internationally due to higher operating costs in Queensland and Australia.  The Aussie dollar; our workplace relations framework including labour costs; high energy costs; and a poor tax system place both Queensland exporters and import competing manufacturers in an increasingly difficult position.

However I believe Queensland’s manufacturing sector has the significant potential to contribute to the continued growth and diversification of our economy.  Innovation, advanced manufacturing, offshoring of tooling, tailoring to niche product requirements and meeting short timeframes are the necessitated future of this sector. Our State's manufacturers, through necessity, have undergone a period of profound adaptation and have emerged lean and hungry for business and I believe their future is very bright.

 

The Highs and Lows for Queensland Businesses in 2017

December 27, 2017

In the last days of 2017 I wanted to share with you my top highs and lows for Queensland’s business community.  It was a year that will have significant impacts for many but it was also a year where a lack of things failed to occur. So let’s go ……

Lows for 2017

  1. Queensland electricity bills continued to skyrocket following years of unsustainable increases mainly in the areas of network charges (over investment and government dividend policy) and green environmental schemes.  Yet politicians spun the debate on this pivotal issue as one of entirely renewables vs coal generation.
  2. Which is why I have the standard of political debate as the second low for 2017.  When you thought we could not go any lower we reached another low ebb in the political discourse in this State and Country.  You only have to look at the vision championed by both sides as part of the recent State Election and question time in both parliaments to get a gauge on the standard of political discourse at present.
  3. A failure on all sides of politics to tackle the issue of debt which is on a trajectory to hit $81 billion by 2020-21.  This has been further compounded by a ballooning public service (20,721 FTEs since the 2015 State Election) that has bolted on $2.1 billion in recurrent expenses with no identified linkage to frontline services for Queenslanders.  At a Federal level regardless of budget repair net debt will peak at near 20% of GDP.
  4. The growing rise of protectionism across Australia and a potential 2.2% threat to Australian GDP if tariffs are reintroduced and State Governments implement ‘going it alone’ procurement policies.
  5. Tropical Cyclone Debbie that crossed the Queensland coastline near Airlie Beach causing widespread physical damage and economic loss to the tourism, agriculture and resources sectors to the tune of $2 billion.
  6. Queensland’s underemployment and low wages growth.  Whilst there are now only 150,000 Queenslanders technically defined as unemployed there are an addition 233,000 persons employed but seeking more hours of work.  Queensland has an underutilisation rate (unemployment rate plus underemployment rate) at just under 15%.  With excess supply of labour Queensland's wage growth remains at historic lows.
  7. The announcement to lift Queensland’s Land Tax rate to 2.5% for properties and holdings greater than $10 million and the substantial flow on impact it will have on jobs and the economy.

Highs for 2017

  1. A Queensland domestic economy that has started to grow again with latest year to the September quarter growth at a healthy 2.7%  This has fed into a resurging labour market with the unemployment rate dropping to 5.8%, the creation of over one hundred thousand jobs across 2017 and the return of interstate migration as population flows towards employment opportunity.  Both employment growth and interstate migration are at their highest levels since before the GFC.
  2. A company tax rate reduction from 30.0% to 27.5% for businesses with a turnover between $10 million and $25 million. In addition businesses with a turnover between $2 million and $10 million are now eligible for the instant asset write off initiative.  Business with a turnover less than $2 million are already eligible for these initiatives.
  3. Businesses in fast food and hospitality have had Sunday penalty (rates) loadings reduced by 25% bringing the final rate down to 125% and 150% respectively and businesses in the retail and pharmacy sector have had their loading reduced by 50%.
  4. The passing of legislation to collect GST on low dollar amount international transactions (less than $1,000) thereby levelling the playing for Australian retailers.
  5. The passing of same sex marriage legislation that not only addresses an equality issue but creates a $139 million stimulus to the Queensland economy in the first year alone.
  6. The Turnbull Government's Royal Commission into Australia’s banks and other financial institutions that will hopefully address a litany of small business complaints against them.
  7. Finally Brisbane’s Cross River Rail will go ahead and is great news in addressing congestion in SEQ as well as 1,500 jobs created and a net economic contribution (NPV) of nearly $1.9 billion.

In looking to 2018 the Palaszczuk Government’s legislative agenda starts afresh following the unwinding of LNP reforms across its first term and delivering outcomes driven by the influence that the Queensland union movement has had on it.  Issues that I am particularly looking forward to over 2018 that will have an impact on Queensland’s 425,000 businesses include:

  • State Government looking to make good on its growth, infrastructure and employment election commitments.
  • The 2018-19 State Budget that will be foundation opportunity for the Treasurer to announce her debt pay down plan.
  • Releasing the Deloitte Report into the linkage between State public sector growth and frontline service delivery.
  • The running of the Commonwealth Games and the legacy it will have on improved customer service and Queensland as a visitor destination.

At the same time a Federal Election is in the wind with hopefully meaningful debate on tax reform (and not just the company tax rate) and also Australia’s federation arrangements including both vertical and horizontal fiscal equalisation.  Embracing holistic tax reform, which includes the GST will not only deliver revenue adequacy to address Australia’s increasing age dependency ratio but can boost the simplicity and international competitiveness of our tax system.  I am somewhat concerned by the increasing militancy of the unions at a national level and their agitation for a further shift of the workplace relations pendulum towards the employee.  This will play out in 2018 for sure.

Finally there are two things that I would really love to see in 2018:

  • Debate on a trial of daylight saving before a referendum on Queensland moving to embrace consistency of time zones across the Australian east coast during October to March each year.
  • For all politicians in 2018 to ditch the negativity of the political discourse in Queensland and Australia.  I am wanting to see politicians start to inspire us with vision that lasts beyond their term of office.

These are fanciful expectations but I have always been an optimist.

Queensland Mid-Year Fiscal and Economic Review 2017-18

December 18, 2017

The MYFER is up and can be found here: https://s3.treasury.qld.gov.au/files/2017-18MYFER.pdf

My overall assessment is that it delivers an improvement in Queensland's budgetary position in 2017-18 and across the forward estimates.  This is technically Jackie Trad's statement but in reality it has Curtis Pitt DNA on it. It is extremely conservative in its revenue forecasts for 2017-18 based on current coking coal prices, employment growth and the beneficial impact this will have on payroll tax receipts and not factoring in increased population growth.  My guess is that this is deliberately the case and in June next year when the Treasurer, Jackie Trad, delivers her first State Budget for 2018-19 she will be announcing a significantly higher operating surplus for 2017-18 (unless of course we get smashed by another natural disaster in the mean time).

Key points are:

  • Forecast net operating surplus of $485 million in 2017-18, an improvement of $339 million on the Budget estimate. The improved position has primarily been driven by an uplift in revenue forecasts through an improved outlook for coal prices, stronger than anticipated national GST collections, four new taxes and increased returns from GOCs.  
  • Since the 2017-18 Budget, royalty revenue has been revised upwards by $806 million across the period 2017-18 to 2020-21. This is mainly the result of coal prices being higher so far in 2017-18, with the premium hard coking coal spot price averaging around $US190/t compared with a Budget forecast of $US138/t for the first two quarters of 2017-18. 
  • Public sector borrowings of $71.222 billion are projected at 30 June 2018, $767 million less than the 2017-18 Budget estimate and in 2020-21 borrowings are expected to be $305 million lower than anticipated in the 2017-18 Budget at $80.843 billion. 
  • An increase in the capital program over the forward estimates to $44.389 billion from $42.750 billion in the 2017-18 Budget. 
  • Forecast economic growth of 2.75% in 2017-18 and 3% in 2018-19 
  • Employment growth has strengthened significantly, with forecast jobs growth revised up from 1% at the time of the Budget to 2.25%. 
  • The forecast unemployment rate has been revised down from 6.25% at the time of the Budget to 6%. 

I have provided below four graphs that I think best describe the main points to note.

Coalition Government's MYEFO 2017-18.

December 18, 2017

Today the Coalition Federal Government released the Mid-Year Economic and Fiscal Outlook.  In summary the Government is delivering a reduced deficit in 2017-18 down from $29.4 billion in the Federal Budget to $23.6 billion in the MYEFO.  However in the grander scheme of things there has not been significant change since the Federal Budget in May.  The Federal Government will not reach a surplus until 2020-21 and we are still making little inroads into a substantial pay down in debt.  It is a case of small steps but at least in the right direction.  

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